So Monday morning I was on the very short investor call for Broadsoft's first quarter being public since it's IPO. Marketwatch has the 2Q2010 results here.

• "Total revenue was $19.8 million in the second quarter of 2010, compared to $17.7 million in the second quarter of 2009"
• Net loss for the second quarter of 2010 was $1.8 million
• Net loss for the first six months of 2010 was $4.4 million

"During the second quarter, our license revenue increased 20%, to $10.6 million, compared to the first quarter of this year, reflecting service providers' demand, as they transition from TDM to IP-based communications, for our flagship product, BroadWorks, which enables carriers to deliver feature-rich IP-based communications services to their enterprise and consumer customers."

More than 50% of revenue is coming from licenses. Mainly VZ FiOS, Comcast, XO and Brazilian MSO, it seemed like from the call.

The key is selling licenses. Many more licenses, since 400+ service providers already own the softswitch. How many more prospective softswitch buyers are out there? Broadsoft clients have to start selling Hosted PBX in droves. Two hurdles:

1. In our TDM-based world, most sales people can't sell IP Communications.
2. ISP's are blocking port traffic which disrupts the voice applications of Hosted VoIP Providers.

Lately, I have been seeing some crazy things out of Channel Managers. Do they not understand that everything comes out since we operate in a small world?

I have seen this twice this month, where someone is a channel manager for a VoIP Provider and also runs a VoIP Provider. You read that correctly. On LinkedIn. Two different people who run a VoIP business (BigTown Business VoIP) that competes with the day job of running a Channel for another VoIP Business (CHI-Town Biz VoIP).

My best guess is that the BigTown is a reseller of CHI-Town for deals that CHI-Town doesn't want. Which leads me to wonder about leads that go into the CHI-Town's channel. Just plain conflict of interest.

And this is why people think telecom is sleazy! Because there is way too much of this crap!

How about a Channel Manager who gives leads to his favorite agents that come from his non-favorite agents? Nice huh?

I have a firm belief that most mergers are just ways to make the books look better by clouding the numbers. Take this headline from the Morning Journal, "CenturyLink has profitable second quarter, primarily due to acquisition". I agree with that.

The telling number is the revenue or income or EBITA, but this metric: "CenturyLink added more than 29,000 high-speed Internet customers in the second quarter, compared to 28,000 in the second quarter of 2009, the company reported." HUH? You added the same number of broadband even though your revenue was up 3x what it was before you merged with EMBARQ?

Windstream added 14,800 new high-speed Internet customers during the second quarter - about 58% resi penetration. ... Total access lines declined by approximately 34,000. [Windstream]

"Qwest saw a decline in its earnings as revenue continued to fall on further landline losses," according to the WSJ. "As with the other telcos, the DSL business continues to be weak. ... Qwest only added 7,000."

Debt is going up (and getting more expensive) while access lines are declining. Long term this doesn't look good. Qwest has been working on an FTTX plan, but it will be a while to pull off (and require more CAPEX than they are now spending).

Most mergers are about scale. The bigger they are the cheaper they can deliver service. How often has that reality been true? Bigger means that there will be massive layoffs to the point that the new company can't find anything or accomplish anything, because all the people with deep domain knowledge (the Linchpins) are gone. Then there is the back office, which usually can't be integrated for months or even years. The political silos and departmental turf mean that no one can work together and there are competing pieces of the company working against each other. It's a nightmare that only the bankers win. Shareholders may make a little bank upfront, but long term value is not on the increase. Teclos play in flat markets: phone, broadband, TV - these aren't growing pools; they are shifting pools. Shifting as customers bounce from cable to telco and back. Shifting as people move around the nation looking for a better job or just A job or a better life. So long term growth opportunities are looking good because they don't innovate and the hardware vendors aren't making enough profits to innovate either.

Sounds bleak but it leaves plenty of room for forward thinking, flexible companies that have a value porposition for a selective target market - and can move on it now!